Congressional Testimony

STATEMENT OF
THE HONORABLE MITCHELL E. DANIELS, JR.
DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET
BEFORE THE
SUBCOMMITTEE ON GOVERNMENT EFFICIENCY, FINANCIAL MANAGEMENT AND
INTERGOVERNMENTAL RELATIONS
OF THE COMMITTEE ON GOVERNMENT REFORM
U.S. HOUSE OF REPRESENTATIVES

March 30, 2001

Mr. Chairman and Members of the Subcommittee, my colleagues have
reported
on the results of the Fiscal Year (FY) 2000 audit of the Government-wide
financial
statements. I would like to take this opportunity to talk about my
management
agenda as Director of OMB.

As you know, I came to OMB from Eli Lilly, and I have been onboard
for just
over two months--it already seems a lot longer. While most of my
management team is in place, including a
1st rate talent in Angela Styles who was just nominated to
head the Office of Federal
Procurement Policy, I am still looking for a Deputy Director for
Management.
I have very specific requirements and expectations for that individual, and
I
will take the time necessary to find the right person. I want someone with
broad management experience in running an organization, someone who can
deliver
on the President's management agenda. I am also seeking a Controller for
the Office of Federal Financial Management
who will ensure that the Government's financial management policies provide
the
framework for linking budget and management decisions to performance.

While at this moment, my immediate priority is to deliver the budget
to Congress
10 days from now, I can tell you that we are moving forward on an ambitious
management
reform agenda, based on the principles set forth in the President's Budget
Blueprint.
On St. Patrick's Day, OMB senior political and career executives
participated
in an all-day review of management issues. We laid the groundwork for this
agenda,
which I intend to present to Congress as a budget addendum later this
summer.

During the last decade, Congress carefully built a legislative path
to strengthen
the framework for financial management and performance measurement. It is
time
to bring financial management in the Federal Government into the
21st century.

The President has called for the Government to be accountable, so
citizens
can judge our performance. As responsible stewards, we must do more to
show how
funding levels relate to performance levels. To date, the Government's
progress
in linking budgets and performance has been slow. Bringing about a much
better
linkage will be a priority of this Administration. Department and agency
heads
have been directed that their 2002 performance plans, which will be
submitted
to you shortly, include performance goals for Presidential initiatives and
for
Government-wide and agency-specific reform proposals. Making good on those
promises--not just making those promises--will be the standard of this
Administration.

Earlier testimony today suggests that the Federal Government has
made some
progress in improving its financial management. Eighteen, or three-fourths
of the 24 largest agencies and departments, passed their audits last year.
The President intends to hold agency heads responsible for passing their
audits, a fundamental requirement in the private sector and a simple
performance
measurement for people to understand. We will keep the pressure on those
agencies without clean opinions and work with them to resolve their systems
and record-keeping deficiencies. Long before the end of this decade all
agencies
will have clean opinions. But, that should not be equated with sound
financial
management.

Audits are simply a means--a tool--not an end unto themselves.
Clean opinions are important for public accountability
but do not necessarily translate to good Government. Agencies can pass
their
audits and still have serious management problems. Some of the agencies
with program
areas on GAO's latest High Risk passed their audits. In fact, if you look
at the three agencies that received straight
"A's" on this Subcommittee's report card for financial management, two have
serious
management challenges.

One's contract management program has been on GAO's High
Risk list every year since 1990.

The other has difficulty estimating future costs for its most
significant
program. It found a $4 billion or 50 percent increase in the
five-year projected
cost of a major construction activity. This is particularly alarming since
only six months ago the agency projected no cost growth.

And those are the superstars, Mr. Chairman.

Several agencies have had, and then lost, clean opinions in recent
years,
suggesting that the opinions were accurate at only one point in time.
Heroic
efforts where people work night and day to get a clean opinion as of a
certain
date are meaningless exercises unless they lead to the next step, the
generating
of reliable financial information on a daily, weekly, monthly, and
quarterly
basis.

There are other agencies that have yet to meet the minimum
requirements necessary
for good budget execution, let alone get a clean opinion. One agency
overspent
its FY 2000 budget by $274 million because it was unable to accurately
project
and account for its costs. This was a violation of both law and one of the
most
basic and long-standing controls in Government-the Anti-Deficiency Act.
Despite
improvement efforts, this is the second such occurrence
in the last four years.

In a separate issue, while national defense is a priority for this
Administration, we must ensure that systemic financial
management problems at the Department of Defense are adequately addressed.
It
is critically important for DoD to modernize its financial management
processes
along with its strategy, mission, and resource decisions.

Yes, there has been progress, but let's keep it in perspective. We
should
postpone celebrating our accomplishments, until we can ensure that there is
an
enduring quality to these achievements. This Administration is ready to
take the
next step in what will be a long-term exercise to learn how to make
decisions based
on the financial and performance information available to us.

Perhaps our greatest challenge will be to embed into the budget
culture in
Washington the habit of using financial information in real time to give
our
citizens the good Government they deserve.

Thank your, Mr. Chairman, for this opportunity to testify before the
Subcommittee.
I would be pleased to answer any questions from the Members.